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Republic ofthe Philippineslu "~r~"~, " " "ENERGY REGULATORYCOMMISSION L

San Miguel Avenue, Pasig City C.,.,'\ ~

IN THE MATTER OF THEAPPLICATION FORAPPROVAL OF THE FEED-INTARIFF ALLOWANCE FORCALENDAR YEAR 2016PURSUANT TO THEGUIDELINES FOR THECOLLECTION OF THE FEED-IN TARIFF ALLOWANCEANDDISBURSEMENT OF' THEFEED-IN TARIFFALLOWANCE FUND, WITHPRAYER FOR PROVISIONALAUTHORITY,

I

ERC CASENO. 2015-216 RC '1

NATIONAL TRANSMISSIONCORPORATION,

Applicant."- - - - - - - - - - - - - - - - - - - - - - - "

NOTICE OF PUBLIC HEARING

TOALL INTERESTED PARTIES:

On 22 December 2015, Applicant National TransmissionCorporation (TransCo) filed an Application for approval ofthe feed-intariff allowance for calendar year 2016 pursuant to the guidelines for 1

the collection of the feed-in tariff allowance and disbursement of the 1

feed-in tariff allowance fund, with prayer for provisional authority.

In the said Application, TransCo alleged, among others, the I

following: '

THE APPLICANT

1. Applicant TransCo is a government instrumentality,created pursuant to Republic Act (RA) No. 9136, otherwise known aS

I

the Electric Power Industry Reform Act of 2001 (EPIRA), with

ERC Case No. 2015-216 RCNotice of Public Hearlng/02 February 2016 of 25

principal office address at TransCo Main Building, Quezon Avenuecorner BIR Road, Diliman, Quezon City, where it may be served withsummons and other processes of this Honorable Commission.

NATURE OF THE APPLICATION

2. TransCo filed the Application in its capacity as FIT-AllFund Administrator tasked with the establishment,management/administration and disbursement/settlement (thru theTrustee Bank) of the FIT-All Fund pursuant to ERC Resolution No.15, Series of 2012 issued on 19 November 2012 and on the bases ofrelevant laws, rules and regulations.

3. On 16 December 2008, R.A. No. 9513 entitled "An ActPromoting the Development, Utilization and Commercialization ofRenewable Energy Resources and for other purposes" (RE Law) wasenacted to (1) accelerate the exploration and development ofrenewable energy resources to achieve energy self-reliance byreducing the country's dependence on fossil fuels and therebyminimize the country's exposure to price fluctuations in theinternational markets; (2) increase the utilization of renewable energyby providing fiscal and non-fiscal incentives; (3) encourage thedevelopment and utilization of renewable energy resources as tools toeffectively prevent or reduce harmful emissions and thereby balancethe goals of economic growth and development with the protection ofhealth and the environment; and (4) establish the necessaryinfrastructure and mechanism to carry out the mandates specified inthe Act and other existing laws.

4. To achieve these state policies, Section 7 of the RE Lawmandates the establishment of a Feed-in Tariff System (FIT System)for electricity produced from wind, solar, ocean, run-of-riverhydropower, and biomass.

5. The Energy Regulatory Commission (ERC) and theNational Renewable Energy Board (NREB) formulated the FITSystem rules, which include: (a) priority connection to the grid forelectricity generated from emerging renewable energy resourceswithin the territory of the Philippines; (b) priority purchase andtransmission of, and payment for, such electricity; (c) determinationof the fixed tariff to be paid to electricity produced from each type ofemerging renewable energy and the mandated number of years forthe application of these rates; (d) the FIT to be set shall be applied tothe emerging renewable energy to be used in compliance with the.renewable portfolio standard.

ERC Case No. 2015-216 RCNotice of Public Hearing/02 February 2016Page30f25

6. On 25 May 2009, the Department of Energy (DOE) issuedthe "Rules and Regulations Implementing Republic Act No. 9513"(RE-IRR) in compliance with Section 33 of the RE Law. Section 5 ofthe RE-IRR defines the FIT System as a "scheme that involves theobligation on the part of electric power industry participants tosource electricity from RE generation at a guaranteed fixed priceapplicable for a given period of time, which shall in no case be lessthan twelve (12) years, to be determined by the ERC." The sameprovision directed the promulgation of the FIT Rules by the ERC inconsultation with the NREB.

7. On 12 July 2010, the Commission issued "Resolution No.16, Series of 2010" entitled "Resolution Adopting the Feed-in TariffRules" (FIT Rules) pursuant to Section 7 of the RE Law and Section 5of the RE-IRR.

8. The FIT Rules established the FIT System and is intendedto regulate the method of establishing and approving the FIT and theFeed-in Tariff Allowance (FIT-All).

9. Under the FIT Rules, the FIT System guarantees alleligible renewable energy plants an entitlement to the applicable FITsfor a period of twenty (20) years.!

10. The FIT-All is a uniform charge (in PhP/kWh) billed to allon-grid electricity consumers who are supplied with electricitythrough the distribution or transmission network. The FIT-All shallbe established and set by the Commission on an annual basis andtaking into account the following: the forecasted annual requiredrevenue of the Eligible RE Plants; previous year's over or underrecoveries; administration costs; forecasted annual electricity salesand such other relevant factors to ensure that no stakeholder isallocated with additional risks in the implementation of the FITs.2

11. Further, Section 2.2 of the FIT Rules provides that theCommission shall approve technology-specific FITs based on suchFITs to be recommended by the NREB. Accordingly, on 16May 2011,the NREB filed before the Commission its "Petition to Initiate Rule-Making for the Adoption of Feed-in Tariff' docketed as ERCCase No.2011-006.

1 Section 4, FIT Rules.2 Section 2.5, FIT Rules.

ERC Case No. 2015-216 RCNotice of Public Hearing/o2 February 2016 Of25

12. On 27 July 2012, the Commission issued its "Decision" inERC Case No. 2011-006 and "Resolution No. 10, Series of 2012"entitled "Resolution Approving the Feed-in Tariff Rates". In saidDecision and Resolution, the Commission approved the followinginitial FIT Rates:

TECHNOLOGY ERC-APPROVED ERC-APPROVEDFIT RATES DEGRESSION RATES(PhP/kWh)

WIND 8.530.5% after year 2 fromeffectivity of FIT

BIOMASS 6.630.5% after year 2 fromeffectivity of FIT

SOLAR 9.686% after year 1 from effectivityof FIT

HYDRO 5.900.5% after year 2 fromeffectivity of FIT

13. On 27 March 2015, the Commission issued Resolution No.06, series of 2015 entitled "Resolution Adopting the New Solar Feed-In Tariff Rate" setting a new Solar FIT Rate of PhP8.69/kWh (hereinreferred to as "Solar FIT 2"). The Solar FIT 2 was issued as a result ofthe revised installation target for solar energy generation from 50MW to 500 MW and shall be applied to new Solar Plants that havebeen commissioned after the effectivity of said Resolution and until15March 2016.

14. On 06 October 2015, the Commission likewise issuedResolution No. 14, series of 2015 also known as "Resolution Adoptingthe Wind Feed-in Tariff (Wind-FIT2) Rate" setting a new Wind FITRate of P7.40/kWh (herein referred to as "Wind FIT 2"). The WindFIT 2 shall only be applied to three (3) wind power projects namely:San Lorenzo, Nabas and Pililia Power Projects which have alreadycommenced commercial operations as certified by the DOE.

15. On 19 November 2012, the Commission issued"Resolution No. 15, Series of 2012" designating TransCo as the FIT-All Fund Administrator tasked with the establishment, management/administration and disbursement/settlement (thru the Trustee Bank)of the FIT-All Fund.

16. The imposition, collection and disbursement of the FIT-All is further covered by the "Guidelines on the Collection of the Feed-

ERC Case No. 2015-216 RCNotice of Public Hearing/02 February 2016Pages Of25

in Tariff Allowance (FIT-All) and the Disbursement of the FIT-AllFund" (Guidelines) issued and approved by the Commission in itsResolution No. 24 dated 16December 2013.

17. Under the FIT-All Guidelines, TransCo has to make anannual determination ofthe FIT-All rate and file its application withthe Commission not later than end of July of each year for the FIT-Allrate that will be implemented for the following year.

18. On 02 July 2015, TransCo, in its letter to the Commission,requested for an extension of ninety (90) days within which to file theapplication for the 2016 FIT-AllRate.

19. The Commission, in its letter dated 20 July 2015,favorably acted upon said request and gave TransCo until the end ofOctober 2015 to file the said Application.

20. On 15October 2015, TransCo, anticipating some delays inapproval process - both internal and external, which will render itunable to file the application by end of October, requested for anotherfifteen (15)-day period within which to file the same or until 15November 2015.

21. On 11 November 2015, TransCo again requested anadditional fifteen (15) days from 15 November 2015 to file theapplication or for such longer period which the Commission deemssufficient for the purpose of completing all the pre-filingrequirements.

22. On 10 December 2015, the ERC, in ERC Case No. 2014-109 RC, issued a Decision approving with finality the amount ofPhpo.0406/kWh as the 2015 FIT-All rate.

23. Therefore, by and pursuant to the RE Law, Resolution No.16 Series of 2010 (FIT Rules), as amended by Resolution No. 15Seriesof 2012, in connection with the Guidelines and other pertinent laws,rules and regulations, this Application is submitted to theCommission for its due consideration of the herein applied for FIT-All Rate for the year 2016.

ERC Case No. 2015-216 RCNotice of Public Hearing/02 February 2016 of 25

FEED-IN TARIFF ALLOWANCE

24. Applicant TransCo has computed a FIT-All Rate ofPhP/kWh 0.1470 for 2016, determined using the formula provided inSection 1.3 of the Guidelines, as follows:

FD +WCA + AA + DAFIT-All = FNS

Where:

DESCRIPTION

FIT-All is the Feed-in Tariff Allowance to be implemented inYeart+I in PhP/kWh, as provided for in the FIT Rules andthe Guidelines.

FD is the estimated Total FIT Differential required forYeart+1in PhP, and as further described in Section 141of the Guidelines.

WCA is the estimated Working Capital Allowance required forYeart+1in PhP, and as further described in Section 142of the Guidelines.

AA is the Administration Allowance to be implemented inYeart+I in PhP, and as further described in Section 1.4.3of the Guidelines.

DA is the Disbursement Allowance to be implemented inYeart+1in PhP, and as further described in Section 1.4.3of the Guidelines.

FNS is the Forecast National Sales, in kWh, to be applied forYear t+Iand as further described in Section 1.4-4.2 of theGuidelines.

T is the year the application for setting the FIT-All is filedwith the ERC.

t+1 is the year following t

ERCCase No. 2015-216 RCNotice of Public Hearing/o2 February 2016Page7of25

25. Whenever Yeaft+l (implementation year) is used in anyformula in the present Application, the same shall refer to the year2016. Correlatively, the Yeaft+2whenever used in any formula in thisApplication shall refer to the year 2017.

COMPONENTS OFTHE FIT-ALL

I. Forecast National Sales

26. The Forecast National Sales (FNS) is the denominator inthe FIT-All formula. The proposed level for 2016 is discussed firstsince it is best to present the determined value of the other FIT-Allcomponents in terms of PhP/kWh, where this FNS is the kilowatt-hours (kWh) denominator.

27. The FNS refers to an estimated total kilowatt-hours ofelectricity billed to consumers who are supplied with electricity in allOn-Grid areas in the Philippines for a given year.

28. The FNS, in kWh, shall be equal to the latest availableElectricity Sales as stated in the Philippine Power Statistics, excludingUtilities Own Use and Power Losses, or as otherwise certified by theDOE, and as adjusted by the historical growth rate published for theimmediately preceding three (3) years.

29. From the historical data sourced from the PhilippinePower Statistics until 20143, TransCo computed for the compoundedannual growth rate (CAGR) of Electricity Sales for a 3-year periodusing the formula:

CAGRto,tn =

Where:vCto) = start valueV(tn) = finish valuetn-to =number of years

1

(Vtn)tn-to- -1Vto

30. TransCo computed the projected 2015 level by increasingthe historical 2014 level by the computed CAGR (2011-2014). Then,

3 The DOE Memorandum dated 21 July 2015 providing for the Electricity and Sales Consumption,in MWh (2003 to 2014)is attached hereto as Annex "A" to "A-t" to form an integral part hereof.

ERCCase No. 2015-216 RCNotice of Public Hearing/o2 February 2016 Of25

TransCo again computed for the rolling 3-year CAGR and so on.4TransCo came up with the following Forecast National ElectricitySales for 2015-2016:

Table 1. Forecast National Electricity Sales, kWhr 2015 r 2016 I65,962,899,825 68,380,633,362

II. Total FIT Differential

31. The Total FIT Differential represents the differencebetween: (1) the forecast applicable FIT Rate for Yeart+1 that eachEligible RE Plant is forecasted to receive for each kWh delivered, and(2) the forecast applicable cost recovery rate as determined under theGuidelines, multiplied by the projected annual energy generationfrom Eligible RE Plant for yeart+l. In setting the FIT-All for Yeart+l,the FIT Differential is represented by the following formula:

FD = [f(FOrecast RE Genx,t+l (Forecast FIT Ratex,t+l

- Forecast Cost Recovery Ratex,t+l))]

+ FDt-1,(over)/under

Where:

DESCRIPTION

Forecast RE IS the Forecast RE Generation of Eligible REGenx,t+l Plantx (in kWh).

Forecast FIT is FIT Rate, as degressed (if applicable) andRatex,t+l adjusted for local inflation and foreign exchange

(FOREX) as forecasted for yeaft+l, in PhP /kWh,that Eligible RE Plantx is forecasted to receive foreach kWh delivered.

4The FNS computation for 2015-2016 is attached hereto as Annex "8" to form an integral parthereof.

ERCCase No. 2015-216 RCNotice of Public Hearlng/02 February 2016 of 25

Forecast Cost is the applicable Forecast Cost Recovery Rate toRecovery be implemented in Yeart+l for Eligible RE Plantx,

in PhPkWh.

FDt-1 is the variance between the actual FIT Differential(over)/under for yeart-l (Actual FDt-,) and the FIT Differential

collected for yeart-l (Collected FDt-1). There is overrecovery if Collected FDt-1>Actual FDt-1and underrecovery if Collected FDt-1is < Actual FDt-1•

32. Alternatively, the formula in Paragraph 31 can be viewedor rewritten as:

FD = Total FIT Revenue - Total Forecast Cost Recovery Revenue+ FDt-1,Cover)/under

A. Forecast Annual Renewable Energy Generation

33. TransCo primarily used the most updated list of REProjects that are projected to be eligible/already eligible under theFIT System in 2014-2017 onwards as provided by the DOE.5

34. With the list from DOE providing the best estimate of theentry of Eligible RE Plants, TransCo aims to be able to adequatelyprovide for the corresponding payout requirements. However, thelist does not in any way give preemptive right to the identifiedprojects to be counted under the final FIT-eligible projects. Neitherdoes it limit the payment of FITs to these projects once implemented.

35. The list includes projects that have already gone intoCommercial Operation even prior to the January 2015implementation of the FIT-All and are assumed to be Eligible REPlants for the purpose of herein computation.

36. Where data were available from RE Developers/PEMCsubmissions, TransCo already put in the actual generation levels ofoperational RE plants.6

sThe DOE letter dated 23 September 2015 providing "Additional Inputs for the Filing of the 2016FIT-All Application", including its attachments, are attached hereto as Annexes "c" to "C-12",to form integral parts hereof.

6The table on the summary of actual generation, forecast generation and capacity factor per REdeveloper with heading "List of FIT Eligible Renewable Energy Developer with Submission on

ERCCase No. 2015-216 RCNotice of Public Hearing/02 February 2016 of25

37. Where the concerned RE Developers, particularly underthe Wind projects, provided energy generation forecast that differedfrom the forecast presented by DOE, TransCo generally used the DOEdata but followed the monthly seasonality culled from the forecastsubmission of the RE Developers. (See Annexes "D" and "D-7" to "D-10".)

38. On the other hand, for some Biomass projects, TransConoted some very high resulting annual capacity factor in the DOEprojection. With the knowledge that most of these biomass plants donot have year round generation capability because of the availabilityof fuel, TransCo adjusted some of the forecast, more or less peggingthe annual capacity factor to around 70%-72% for those that wereshown to have very high levels. (See Annexes "D" and "D-15" to "D-19".)

39. For Solar and Hydro plants, TransCo generally followedthe projection of the RE Developers. For those without submission,the annual projection from DOE was used and the same seasonalityindices as in the 2014-2015 Application were applied. (See Annexes"D" and "D-l" to "D-6, "D-ll" to D-14".)

40. The 2017 projects were also considered, but only in thecomputation of the WCA, which requires the payout for year t+2,which in this case is 2017.

41. TransCo limited the determination of the FIT-All rate toinclude only Eligible RE capacities up to the installation targets set bythe DOE as follows: 500 MW for Solar up to March 2016, 400 MWfor Wind, 250 MW for Hydropower and 250 MW for Biomass.

42. At the same time, the principle of commercial andtechnical indivisibility of projects was observed, hence, theinstallation target could be exceeded if the last plant to complete thesame renders the total beyond the target. This happened in the caseof Solar.

Actual & Updated Generation (2014 to 2016)" (and its attachments) is attached hereto as Annex"D" to "D-19" to form an integral part hereof.

ERCCase No. 2015-216RCNotice of Public Hearingj02 February 2016Of25

43. Based on the foregoing, the applicable Forecast AnnualRenewable Energy Generation of Eligible RE Plants (kWh) for theyears 2014-2015 (lumped)7, 2016 and 2017 are as follows:

Table 2. Forecast Annual Renewable Energy Generation, MWhTechnology 2014-2015 2016 2017Biomass 309,839 682,407 761,454

Hydropower 108,271 187,342 492,222Solar 158,580 632,686 707,963Wind 875,169 977,205 977,477Total 1,451,859 2,479,639 2,939,116

B. Forecast Applicable FIT Rate and Forecast FITRevenue

44. Forecast Applicable FIT Rate refers to the prevailing ERC-approved and published schedule of rates in PhP jkWh for eachemerging renewable energy technology, as degressed by the relevantdegression rates, if applicable, and adjusted for Consumer Price Index(CPI) and Foreign Exchange (FOREX), in accordance with Section2.10 ofthe FIT Rules.s

45. Currently, the prevailing FIT Rates are based on the ERCDecision dated 27 July 2012 in ERC Case No. 2011-006 RM, ERCResolution NO.6, series of 2016 for Solar FIT 2 and ERC ResolutionNo. 14, series of 2015 for Wind FIT 2.

46. Following the FIT Rules, the prevailing FIT Rates for 2015are adjusted for inflation and foreign exchange for the adjusted 2016rates, as shown in Table 3 below.9 However, inasmuch as the ERChas not issued FIT-eligible Certificate of Compliance under Solar FIT2 and Wind FIT 2 as of October 2015, TransCo did not consider anyadjustment of said rates for 2016.

1fhe 2014 and 2015 levels are a mix of actual and forecast values.e Section 1-4.1.1,Guidelines."Details of computation of the 2016 adjusted FIT rates is hereto attached as Annex. "E" andmade an integral part hereof.


Table 3. 2016 Adjusted FIT Rates, PhP /kWh

Technology 2015 Base 2016 Adjusted FIT-Rate IIFITRate 2014-2015 Entrant 2016 Entrant :1

Biomass 6.6300 7.0508 7.0508 IHydro 5.9000 6.4601 6.4601SolarFill 9.6800 9.9067FIT2 8.6900 8.6900 8.6900

Wind IFill 8.5300 8.9006 IFIT2 7.4000 7.4000

47. In addition, TransCo did not apply any degression for2016 for all FIT rates.

48. The Total FIT Revenue appearing in the formula inParagraph 32 is obtained by multiplying the Eligible RE generationper technology as in Table 2 by the corresponding appropriate FITrates in Table 3. For 2017, which is required only for the computationof the Working Capital Allowance, the same Adjusted FIT-rates as2016 were used. The resulting levels are given as follows:

Table 4. Total FIT Revenue by Technology, in PesosTechnology 2014-2015 2016 2017Biomass 2,047,346,764 4,811,520,857 5,368,864,647Hvdropower 636,276,137 1,210,251,660 3,179,822,244Solar 1,517,805,602 5,685,348,771 6,340,512,072Wind 6,983,753,305 7,969,444,430 7,971,873,033Total 11,185,181,807 19,676,565,718 22,861,071,996

C. Forecast Cost Recovery Rate

49. The Forecast Cost Recovery Rate (FCRR) is the projectedgeneration rate that the Eligible RE Plant would likely receive had itnot been under the FIT System.

50. Under Section 1.4.1.2 of the Guidelines, the manner bywhich the FCRR is forecasted and applied to a particular Eligible REPlant shall be based on whether or not the Eligible RE Plant operatesin a Grid where the Wholesale Electricity Spot Market (WESM) isoperational or not.

ERCCase No. 2015-216 RCNotice of Public Hearing/02 February 2016 of 25

51. Where WESM is operational, the FCRR for the EligibleRE Plant shall be equivalent to the average of the monthly system Ex-Ante Load Weighted Average Price (LWAP) of the WESM for theLuzon and Visayas Grids for the thirty-six (36) months immediatelypreceding the filing of the application for the setting of the FIT-All.

52. The FCRR to be applied for Eligible RE Plants whereWESM is non-operational (Mindanao) shall be the weighted averageof the generation cost of the Host Distribution Utility (Host DU) fromall its other generation sources, excluding generation from anyEligible RE Plant-Non-WESM with a Renewable Energy SupplyAgreement (RESA) with the Host DU, for the nearest twelve (12)months preceding the filing of the application for the setting of theFIT-All.

53. TransCo requested the Philippine Electricity MarketCorporation (PEMC) for an update on the Load Weighted AveragePrice (LWAP) for the period January 2012 to April 201510 which thelatter provided on 1June 2015.

54. TransCo further updated said submission by appendingthe May 2015 to August 2015 data sourced from the PEMC website."

55. Consequently, TransCo came up with the followingaverages for Luzon and Visayas:

Table 5. Average LWAP, PhP/kWh

I Luzon I. 5.5028

Visayas4.5278

56. For Mindanao, additional Host DUs were identified fromthe lineup of projects:

loThe PEMC letter dated 01 June 2015 on the "Data on Load Weighted Average Price (LWAP) forLuzon and Visayas", including a computer printout of the data in the CD submitted is attachedhereto as Annexes "F" to "F-I" to form an integral part hereof."Print-outs of the Monthly Summary Report for May, June, July and August 2015 from PEMCwebsite (www.wesm.ph ) are hereto attached as Annexes "G" to "G-3" to form an integral parthereof.

http://www.wesm.ph


Host DU Plant Name REDeveloper

OASURECO Tudaya 2 Hydroelectric Power Project HedcorTudaya, Inc.

OASURECO Digos Solar PVPower Project Phase 1 Enfinlty Philippines Renewable Resources, Inc.

OASURECO Digos Solar PVPower Project Phase 2 Enfinity Philippines Renewable Resources, Inc.

ZAMCELCO Pasonanca Hydroelectric Power Project Phllcarbon, Inc.

MAGElCO 3.5 GEEC MW Biomass Cogeneration System Green Earth Enersource Corporation

BUSECO Manolo Fortich 1 HEP Hedcor Bukidnon,lnc.

BUSECO Manalo Fortich 2 HEP Hedcor Bukidnon,lnc.

BUSECO Kibawe Solar Power Project Asian Green Energy Corporation

MORESCO II limbatangon Hydroelectric Power Project Turbines Resources & Development Corp.

SOCOTECOII Centra la Sola r Power Project NVVogt Philippines Solar Energy One, Inc.

SOCOTECOII GenSan Solar Power Project Phase II Del Sol CGS,Inc.

57. TransCo adopted the Weighted Average GenerationCharge of DASURECO in the amount of P4.7592 as determined by theCommission in ERC Case No. 2014-109 RC.

58. For the other Host DUs, on 20 October 2015, TransCorequested the ERC for the weighted average generation cost data. Inthe meantime that said information has not been received, TransCoused figures from www.kuryente.org (save for DASURECO) asfollows'2:

Table 6. FCRR for Host DUs, PhP /kWh

Host DUWeighted AverageGeneration Cost

DASURECO 4.7592ZAMCELCO 3.9706MAGELCO 2.7801BUSECO 3.7339

MORESCO II 3.3684SOCOTECO II 4.7054

59. Multiplying the Forecast Annual Eligible RE Generationin Table 2 by the appropriate Forecast Cost Recovery Rates gives thefollowing total FCRR in pesos:

"Printouts of MAGELCO Effective Rate for Residential Customer for the period April 2013 toMarch 2014, ZAMCELCO Effective Rate for Residential Customer for the period March 2013 toFebruary 2014, BUSECO Effective Rate for Residential Customer for the period March 2014 toFebruary 2015, MORESCO II Effective Rate for Residential Customer for the period February2012 to December 2013 and SOCOTECO II Effective Rate for Residential Customer for the periodMay 2013 to June 2014 from the website www.kuryente.org are attached hereto as Annexes "U"to "H-ll", "I" to "I-II", "J" to "J-Il", "K" to "K-It", and "L" to "L-ll", respectively, to formintegral parts hereof.

http://www.kuryente.org

http://www.kuryente.org

ERC Case No. 2015-216 RCNotice of Public Hearing/02 February 2016 of25

Table 7. Total Forecast Cost Revenue by Technology, in PesosTechnology 2014-2015 2016 .. 2017

Biomass 1,547,479,452 3,548,498,598 3,983,476,564Hydropower 556,426,786 927,734,772 2,183,491,016Solar 844,922,109 3,093,934,257 3,454,756,715Wind 3,940,870,272 5,180,613,653 5,182,115,181Total 6,889,698,621 12,750,781,280 14,803,839,476

Similarly as in the FIT rate, the 2016 Forecast Cost RecoveryRate was used for 2017 since the same is merely intended for the.determination of the Working Capital Allowance as discussed below.

60. 2015 Under-recoveries. The last term in the formula forFIT Differential is the amount of under-recovery or over-recovery ofthe FIT Differential.

61. By the end of 2015, it is estimated that the FIT-All Fundwill have a deficit in terms of collection vis-a-vis payables ofPhP1,835,907,894.08'3, hence, an under-recovery.

62. FIT Differential. Following the formula for FD inParagraph 32 (first two terms), the total FCRR in Table 7 issubtracted from the FIT Revenue in Table 4 and yields the followingfor 2014-2017:

Table 8. FIT Differential (without Under-recovery), in PesosTechnolo"V 2014-2015 2016 2017Biomass 499,867,312 1,263,022,259 1,385,388,084Hydropower 79,849,350 282,516,888 996,331,227 ISolar 672,883,492 2,591,414,514 2,885,755,357Wind 3,042,883,032 2,788,830,778 2,789,757,852 ITotal 4,295,483,186 6,925,784,439 8,057,232,521 I

The 2017 levels are shown only for the purpose of computing theWCAwhich is discussed below.

63. The final FIT Differential for 2016 in P/kWh, inclusive ofthe under-recovery for 2015, is as follows:

13Tableshowing the details of computation of the 2015 FIT Differential deficiency is heretoattached as Annex "M" and made an integral part hereof.


Table 9. FIT Differential (with Under-recovery), III PesosParticulars Amount P/kWh

2016 FD 6,925,784,439 0.10132015 FDover(under) 1,835,907,894 0.0268Total 8,761,692,333 0.1281

III. Working Capital Allowance

64. The WCA is part of the FIT-All and serves as buffer toaddress any default or delay in the collection and/or remittance of theFIT-All and/or Actual Cost Recovery Revenue (ACRR) including, butnot limited to, the following:

1. Variations between the actual and forecasted (a) REGeneration from Eligible RE Plants resulting fromover- and under- generation, (b) Annual National Salesand (c) applicable Forecast Cost Recovery Rates andActual Cost Recovery Revenues;

II. The timing difference of the collection and billing cyclefor the FIT-All and Actual Cost Recovery Revenue; and

lll. Any other collection or payment shortfall.

65. The WCA amount for collection is expressed as:

WCAt+1 = (ForecastAnnuaIPayoutt+zxFactorRate)- WCAEndingBalancet

Where:

WCAt+1 Is the Working Capital Allowance to be funded duringYeart+l

Forecast Is the projected amount of pay abIes out of the FIT-AllAnnual Fund for yeaft+2 consisting of forecasted Total FITPayoutt+2 Revenues, forecasted Administration Allowance and

forecasted Disbursement Allowance for Yeart+2. Theforecasted Total FIT Revenues for Yeart+2 is the sumof the product of the Forecast RE Generation of

ERCCase No. 2015-216 RCNotice of Public Hearing/02 February 20160f25

Eligible RE Plantx for Yeart+2 multiplied by theappropriate FIT Ratex for Year t+2.The forecastedAdministration Allowance for Yeart+2is theAdministration Allowance for Yeaft+l, less any non-recurring expenditures such as those relating to theinitial filing of the FIT-All, adjusted for forecast CPIfor Yeaft+2.The forecasted Disbursement Allowancefor Yeart+2is the projected level of payment to theTrustee Bank in Yeart+2.

WCAEndingBalance t

Factor Rate

Is the ending balance of the Working CapitalAllowance account in Yeart including any interestincome earned in the WCA account and all othercomponent accounts of the FIT-All Fund; ifthis is notavailable at the time of filing, the ending balance forthe month immediately preceding the month of filing,subject to updating by the ERC of the actual endingbalance of the WCAaccount in Yeaft if it shall becomeavailable prior to the issuance of its Decision on theFIT-All application.Is the factor rate approved by the ERC, uponrecommendation of the NREB, reflective of fundingrequirements of the FIT-All Fund, adjusted by (i) aperiod factor based on the billing and collection cycleof the Collection Agents as described III theGuidelines; and (ii) the collection efficiencies ofCollection Agents. Data for the initial year shall besourced from PSALM for its collection of theUniversal Charge. Data for succeeding years shall bebased on FIT-Allhistorical collection efficiency rate.

66. From the foregoing, it may be gleaned that an initialForecast Annual Payout for the year 2017 needs to be determinedsince it is envisioned that buffer requirements for the following yearshould be collected and built up during the current year. Hence,aside from the 2016 levels for Forecast Cost Recovery Revenue, FD,AAand DA, the 2017 projected levels were also established.

67. For the purpose of computing the WCA,the Forecast CostRecovery Rates used by TransCo for 2017 are the same level as the2016. The same holds for the FIT Rates.


68. Summarizing Table7 and Table 8, we have the followinginputs in computing the Forecast Annual Payout for 2017:

Table 10. 2017 Forecast Cost Recovery Revenue and FITDifferential, in Pesos

TechnologyFORECAST COST

FIT DIFFERENTIALRECOVERY REVENUE

Biomass 3,983,476,564 1,385,388,084Hvdrooower 2,183,491,016 996,331,22750lar 3,454,756,715 2,885,755,357Wind 5,182,115,181 2,789,757,852Total 14,803,839,476 8,057,232,521

69. The projected AAfor 2016 in the meantime is set to zero(0) for the purpose of computing the WCA.

70. The proposed trustee feel Disbursement Allowance isestimated at the 2016 level of PhP 1,054,099.95 from Paragraph 81.

71. Combining the results and assumptions given III

Paragraphs 68 to 70, the Forecast Annual Payout for 2017 is asfollows:

Table 11.2017 Forecast Annual Payout, in PesosParticulars 2017 I

Forecast Cost Recoverv Revenue 14,803,839,476FIT Differential 8,057,232,521Administration Allowance -Disbursement Allowance 1,054,100Total Annual Payout 22,862,126,096

72. The Guidelines further provide the use of a Factor Ratethat will be multiplied to the Forecast Annual Payout for 2016.

73. Pursuant to the Guidelines, the NREB recommended aformula for the Factor Rate in the 2014-2015 FIT-All Application.Using the same formula for this Application but with updated inputsyielded a factor rate of 5.5145%.'4

74. Further, the Guidelines define the WCA Ending Balanceto be the balance of the WCAcomponent account for the immediately

"Factor Rate computation using the formula recommended by NREB in its Resolution NO.3Series of 2014 is attached hereto as Annex "N" to form an integral part hereof.

ERCCase No. 2015-216RCNotice of Public Hearing/02 February 2016of25

preceding month prior to the month of filing. Given the deficiency inthe fund balance to address even the FD, the WCA in fact has nobalance. Truth to tell, the amounts TransCo used to augment theACRR remittance of PEMC and the Disbursement Allowance itactually paid to LBP as trustee fee, given there was no specifiedamount in the 2014-2015 Application for the DisbursementAllowance, constitute negative fund balance. Thus, TransCoconsidered a WCA Ending Balance of -PhP 28,599,294.54, whichrepresents the estimated deficiency for ACRR and DA by the end of2015.

Table 12. Determination of the WCAEndingBalance,in PesosForecast CRR Receivable (Sept 2015-Dec 2015) 3,837,875,248.49Expected CRR Collection (99.27% Collection Efficiency) 3,810,015,943.941Estimated Uncollected CRR 27,859,304,54Add: 2015 Disbursement Allowance 739,990.00WCA Deficiency 28,599,294.54

75. From the given information, the combined bufferrequired for 2016, which is equivalent to the 2017 requirementmultiplied by the Factor Rate less the WCA ending balance, isPhP1,289,339,613 derived as:

Table 13. Determination of WCA, in PesosTechnology 2016 2017 I

Forecast Annual Payout 22,862,126,096x Factor Rate 5.5145%Equals: Portion of Annual Payout 1,260,740,318Less: WCA Ending Balance (Year n) (28,599,295)Working Capital Allowance 1,289,339,613

WCA PhP/kWh 0.0189

76. The table provides the corresponding PhP /kWh level ofthe WCA for 2016, which is PhP /kWh 0.0189.

IV. Administration and Disbursement Allowance

77. As provided for in Section 2.5 of the FIT Rules, the FIT-All shall also take into account the Applicant's administration costs,to defray expenses of the Administrator in connection with theperformance of its functions as FIT All Fund Administrator(Administration Allowance).


78. For the year 2016, TransCo agam proposes anAdministration Allowance of zero (0).

79. A similar fee may be imposed by the designated Trustee ofthe FIT-All Fund in accordance with the Trust Agreement approvedby the ERC, to defray standard administrative costs in establishingand managing the actual collection and disbursements ofthe FIT-AllFund and all other monetary collections authorized by the FIT Rules(Disbursement Allowance).

80. From the Trust Agreement entered into by Land Bank ofthe Philippines (LBP)-Trust and TransCo on 03 March 2015'5 andapproved by the ERC, TransCo shall pay a fixed fee of P720,000 perannum plus some variable components.

81. Based on TransCo's estimates of fund balances which willbe the major basis of the variable component that is the BangkoSentral ng Pilipinas supervision fee, the Disbursement Allowance orthe service fee of LBPfor 2016 is PhP1,054,099.95.'6

v. FIT-ALL RATE FOR 2016

82. Applying the above components to the formula for FIT-All,we have the following, in PhP/kWh:

FIT-All = FD +WCA + AA + DAFNS

= 0.1281 + 0.0189 + a + 0.0000= 0.1470

83. In more detail, the components and result of the FIT-Allcalculation may be summarized in the following table:

'5 Copy of the Trust Agreement dated 03 March 2015 is hereto attached as Annex "0" to "0-23"and made an integral part hereof. ''6Details of computation of the proposed DA is hereto attached as Annex "P" and made anintegral part hereof.

ERC Case No. 2015-216 RCNotice of Public Hearing/02 February 2016 Of25

Table 14. Summary of 2016 FIT-AllRate ComputationCOMPONENTS Amount (Php) Rate (P/kWh) ShareFD 8,761,692,333 0.1281 87.16%WCA 1,289,339,613 0.0189 12.83%AA 0.0000 0.00%DA 1,054,100 0.0000 0.01%Total 10,052,086,045FNS, kWh 68,380,633,362 0.1470FIT-All, Php/kWh

84. However, TransCo would like to present some additionalcomputations that show the 2016 FIT-All at different categories ofFIT-eligible/-candidate RE Projects:

Table15. Incremental Movement of the 2016 FIT-All forDifferent RE Plant/Project Categories

With With FITCOC With COE With Nomination DOE List IPayment As

Increase! Increasel Increasel 1of October Total

IncreaselTotal Total Total I

5,2015 (Decrease) (Decrease) (Decrease) (Decrease) iMW 345.92 69.64 415.56 259.00 674.56 32.00 706.56 463.84 1,170.39MWH 807,951 172,651 980,602 626,073 1,606,675 153,03Z 1,759,707 719,933 2,479,639

FIT-All Rate. 0.0566 0.0038 0.0605 0.0373 0.0978 0.0047 0.1025 0.0445 0.1470P/kWh

FIT COC. Certificate of Compliance Issued by the EReCOE. Certificate of Endorsement Issued by the DOENomination (for FIT Eligibility) -Issued by the DOE

Amore detailed table of the FIT-All calculation above and a listing ofRE Plants/Projects per category are provided in Annexes "Q" and "R",respectively.

85. In view of the Commission's Decision in ERC Case No.2014-109 RC limiting the forecast RE generation included in thecomputation of the FIT-All to those RE plants with COEs, TransCoopted to recommend and seek the Honorable Commission's approvalof a FIT-All rate lower than the total computed level of PhP/kWh0.1470. As can be gleaned from Table 15, the computed 2016 FIT-Allrate covering RE Projects with at least nomination from DOE as ofend of October 2015 for the FIT system is PhP/kWh 0.1025. Theseprojects already have ongoing construction and have reached at least80% electromechanical completion, thus, are almost sure to operatewithin the period under consideration, if not already operating todate. It is TransCo's judgment that the two (2) additional plants ontop of RE projects with COEwill likely complete the requirement forFIT eligibility within the period, thus, qualify to be counted in theinstant Application.


86. Finally, TransCo wishes to manifest that while it wasdirected by the Honorable Commission in ERCCase No. 2014-109 RCto file a separate application for a revised FIT-All to cover the 2015under-recoveries, the same have been incorporated in the instantApplication, consistent with the Guidelines. As discussed in item II.Total FIT Differential above, (over)/under recovery is alreadyincorporated in the formula of the FIT Differential and as such isalready captured in the determination of the FIT-All Rate for 2016.Further, the estimated under-recovery for the Actual Cost RecoveryRevenue and provision for Disbursement Allowance are made part ofthe WCA ending balance. Hence, TransCo submits that a separateapplication would no longer be necessary.

ALLEGATIONS IN SUPPORT OF THE PRAYER FORPROVISIONAL AUTHORITY

87. TransCo repleads the foregoing allegations insofar as theymay be applicable.

88. It is respectfully submitted that the computation of, aswell as the data used by, TransCo are all in accordance with the FITRules and the Guidelines issued by the ERC.

89. On this basis, TransCo most respectfully moves for theimmediate issuance of a "Provisional Authority" pursuant to Rule 14,Section 317 of the ERC Rules of Practice and Procedures to allowapplicant TransCo to timely implement the FIT-All Rate of PhP/kWh0.1025 effective January 2016 without prejudice to the final andactual rate pending the final disposition of its present Application.

90. The grant of a Provisional Authority will allow TransCo toperform its duties to make a timely payment of the FIT Rate to REDevelopers to which they are entitled thereby allowing theircontinued operations.

91. In support of the foregoing allegations in this Application,including those for the issuance of the provisional authority, TransCo

17 "Section 3. Action on the Motion. - Motions for provisional authority or interim relief may beacted upon with or without hearing. The Commission shall act on the motion on the basis of theallegations of the application or petition and supporting documents and other evidences (sic) thatapplicant or petitioner has submitted and the comments or opposition filed by any interestedperson, if there be any."

ERCCase No. 2015-216 RCNotice of Public Hearingj02 February 2016 of 25

hereby submits the Judicial Affidavit of Ms. Dinna O. Dizon, Managerof Compliance Monitoring Department (CMD).,8

92. Applicant Transco prays for the Commission to:

a. Pending hearing on the merits of the present Application,provisional authority to collect the FIT-ALL of PhPjkWh0.1025 effective January 2016 billing period be issued;

b. The Collection Agents - DUs, RES and NGCP be directedto bill, collect and remit the FIT-All to the FIT-All Fund asprovided in the FIT-All Guidelines;

c. PEMC and the Host DUs be directed to remit the CRR tothe FIT-All Fund as provided in the FIT-All Guidelines;

d. The Factor Rate resulting from an updating of inputs inthe recommended formula by the NREB under the 2014-2015 FIT-All Application (ERC Case No. 2014-109 RC) beapproved and applied in the computation of the WCA andthe FIT-All Rate for 2016;

e. After due notice and hearing, a permanent approval forApplicant TransCo be granted to implement the FIT-AllRate for 2016 of PhP jkWh 0.1025, computed for REProjects with at least nomination from DOE for eligibilityunder the FIT system, or in the alternative, such otheramount as may be found by the Commission to beconsistent with the FIT-All Guidelines and on the basis ofnew and updated information not heretofore available tothe Applicant at the time of the filing of the presentapplication;

f. TransCo be exempt from payment of permit/supervisionfees, if any.

g. Other reliefs as may be just and equitable under thepremises are likewise most respectfully prayed for.

,SAcopy of the Judicial Affidavit of Ms. Dinna O. Dizon is attached hereto as Annex "8" to forman integral part hereof.

ERCCase No. 2015-216 RCNotice of Public H;earingj02 February 2016 of 25

The Commission has set the application for jurisdictionalhearing, expository presentation, pre-trial conference and evidentiaryhearing on the following dates and venues:

DATE TIME VENUE PARTICULARS

Two 0' dockERCHearing

Room Jurisdictional08 March in the 15th Floor, Pacific Hearing and2016 afternoon Center Building, Expository

(Tuesday) (2:00 P.M.) SanMiguel PresentationAvenue, Pasig City

Two o'clock ERCVisayas Field15March in the Office, St. Mary's Expository2016 afternoon Drive, Banilad, Presentation

(Tuesday) (2:00 P.M.) CebuCity.

ERCMindanao5April 2016 Ten 0' clock Field Office,(Tuesday) in the Mintrade Expository

morning Building, Presentation(10:00 MonteverdeA.M.) Avenue corner

Sales Street,DavaoCity

Ten 0' clock ERCHearing Pre-trial20 April in the Room Conference2016 morning 15th Floor, Pacific and

(Wednesday) (10:00 Center Building, EvidentiaryA.M.) SanMiguel Hearing

Avenue, Pasig City

All persons who have an interest in the subject matter of theproceeding may become a party by filing, at least five (5) days prior tothe initial hearing and subject to the requirements in the ERC's Rulesof Practice and Procedure, a verified petition with the Commissiongiving the docket number and title of the proceeding and stating: (1)the petitioner's name and address; (2) the nature of petitioner'sinterest in the subject matter of the proceeding, and the way and

ERCCase No. 2015-216 RCNotice of Public Hearing/02 February 2016 Of25

manner in which such interest is affected by the issues involved in theproceeding; and (3) a statement of the relief desired.

All other persons who may want their views known to theCommission with respect to the subject matter of the proceeding mayfile their opposition to the application or comment thereon at anystage of the proceeding before the applicant concludes thepresentation of its evidence. No particular form of opposition orcomment is required, but the document, letter or writing shouldcontain the name and address of such person and a concise statementof the opposition or comment and the grounds relied upon.

All such persons who wish to have a copy of the application mayrequest from the applicant that they be furnished with the same, priorto the date of the initial hearing. The applicant is hereby directed tofurnish all those making such request with copies of the applicationand its attachments, subject to the reimbursement of reasonablephotocopying costs. Any such person may likewise examine theapplication and other pertinent records filed with the Commissionduring standard office hours.

WITNESS, the Honorable Chairman, JOSE VICENTE B.SALAZAR, and the Honorable Commissioners, ALFREDO J.NON, GLORIA VICTORIA C. YAP-TARDC, JOSEFINAPATRICIA A. MAGPALE-ASIRIT, and GERONIMO D. STA.ANA, Energy Regulatory Commission, this 2nd day of February, 2016at Pasig City.

ATTY.NA J. MARASIGANChief of Staff

Office of the Chairman and CEO

k{LS: ICG/AR.'G(APVNPH 2015-216 RC

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